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Who do we owe all this money to?! Watch

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    lets just print more money =D
    yay
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    Haha I'm waiting for someone to come and write an essay on how drastically that wouldn't work.
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    (Original post by GwrxVurfer)
    [*]The Government has to borrow all our money into existence
    Can you explain how this works in relation to QE?

    Or the tenner in my pocket?
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    (Original post by GwrxVurfer)
    A bank conjures £1,000,000 of new money into existence by inputting digits into a HMG bank account in return for the Gilt. Note that they do not use money on deposit for this, they actually create new money.
    So you're saying Barlays invents money to buy the gilts?

    Why don't they do the same to pay their staff and build an office on the moon?
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    (Original post by GwrxVurfer)
    A very basic example, but you asked how this works in relation to the physical money you have, and this example shows how it works at the core level.
    So who do I pay interest to on my tenner in my pocket? Since all money is borrowed and all borrowed money comes at a rate of interest.

    ---------------------------

    I also asked how it worked in relation to QE.
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    We owe the money to countries who aren't in debt, and have surplus money that they lend out. Mainly oil-rich countries like Saudi Arabia. The government also borrows from banks.
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    (Original post by GwrxVurfer)
    You don't pay interest on the tenner in your pocket. The Government do. That's why they tax you, to try and pay their mounting debts. That £10 in existence (assuming it was borrowed at maybe 10% interest) means the Government has a further £11 worth of debt - £10 is the principle amount, and £1 is the interest.

    You also suggested Barclays should create new money to pay their staff, but that is currently illegal under legislation.

    http://www.dmo.gov.uk/index.aspx?page=About/About_Gilts
    So the legislation says they can only create money to buy gilts?
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    Uhm haven't read the rest of the thread, but no one the frotn page mentioned it so,...most of the debt is owed to private investors who hold goverment bonds, that's mhm just you and me,
    The amount held by private/intitutional/foreign/ investors varys
    goverment debt only become critical if two much is owed to foreign investors. (thats fyi the reason why japan isn't crumbeling under it's goverment debt (st abou 200% because most of it is hold by japanese private investors.
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    (Original post by GwrxVurfer)
    As far as I am aware, yes.

    It's different if you or I bought a Government Gilt, as the money we give already exists in the money supply. But if a bank buys it, they can create the money out of thin air.
    So why wouldn't a bank bid for the full allocation at 0.1% yield?

    They'd increase their assets while not increasing their liabilities, they make a pure profit on however much debt they buy in the form of gilts.

    Why do gilt auctions fail/not sell the full allocation of gilts?
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    (Original post by GwrxVurfer)
    Governments do not have to go into debt borrowing conjured-up money, they can simply create the money themselves.
    You said the Govt has to borrow all money into existence though...

    *confused*

    (Original post by GwrxVurfer)
    The Government has to borrow all our money into existence
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    (Original post by GwrxVurfer)
    Of course, as the money is created out of nothing, there is no real risk to the bank. Worst-case scenario, they end up with the same amount of money they had before.
    So why do gilt strikes happen?

    http://uk.reuters.com/article/2009/0...52O2GK20090325
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    (Original post by GwrxVurfer)
    Sorry, I didn't phrase that well.

    They have to borrow all our money under our current system.


    But this isn't necessary. There is a better monetary system, and that is for Government to issue the money they need debt-free.
    So why don't they do that?
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    (Original post by GwrxVurfer)
    Of course, as the money is created out of nothing, there is no real risk to the bank. Worst-case scenario, they end up with the same amount of money they had before.
    Any ideas why sometimes not all gilts are sold?

    http://uk.reuters.com/article/2009/0...52O2GK20090325

    Since every bank must bid for 100% of the gilts and there are hundreds of banks out there.
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    (Original post by GwrxVurfer)
    Why do you think that only banks must bid for 100% of the gilts?
    They'd be mad to bid for any less?

    Why would they bid to make any less profit than they can do?
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    (Original post by GwrxVurfer)
    No, I'm asking if you think that only banks are allowed to buy Gilts?
    I didn't suggest they were, but if you have a shortfall it means that no bank has bid for the maximum.

    In any case, since a bank makes 100% profit (+ yield) on the transaction, surely their bids are always at the lowest yeild. No?

    Anyone else only makes the yield, a bank get the gilts for free. No?
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    The jews.
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    (Original post by GwrxVurfer)
    A bank can buy Gilts, officially they are paying for it. However, as this money has been conjured out of thin air, they essentially get it "for free", yes.
    So why would anyone else be able to buy them direct?

    It would be far less profitable.

    Anyway the question was why banks would ever bid for less than 100% of the gilt sale.
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    (Original post by GwrxVurfer)
    Why would banks bid for less than 100% of the gilt sale?
    Because they aren't allowed to 'create money' to pay for the gilts and they don't think the yield range for the issue gives good value for money?
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    I always thought the whole 'wipe the slate' thing would be awesome, but I'm pretty sure it's much much much much more complicated than that. Also there must be one country who'd end up 'even' and have no debt at all, or one who's the only one with debt left, or something like that, and it would mess up all the economies of everywhere.
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    (Original post by GwrxVurfer)
    You or I can buy a Government Gilt, but we have to use actual money. When a bank buys a Gilt, they can create money to buy it.
    But my guess is that you don't have a source?

    If that were the case every bank would bid at 0.001% or lower in order to get the full allocation and take the free money. As it is they are currently bidding at approx 3.7% for the 10 year.
 
 
 
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